Democracy and growth

Abstract

Does democratic governance deliver economic dividends? Even if it didn’t we might still have cause to think democracy was worth it. After all, it seems fair to let people have a say in shaping the rules that govern their lives, and there is some evidence to suggest that democracy delivers important non-economic benefits. Nevertheless, the question of democracy’s impact on economic growth is an important one; at least up to a point wealth is an important component of welfare. And until recently the most influential studies in economics suggested that democratic governance has not been growth enhancing. In particular, sophisticated econometric work by conservative economist Robert Barro showed, or appeared to show, democracy having a small average negative effect on growth, everything else being equal. Barro’s work wasn’t the final word on the matter. Empirical work by political scientist John Gerring and co-authors found that in the long run democracy was probably growth enhancing, and at least one, more recent, econometric study suggests democratisation improves subsequent economic performance. Yet, for the most part, empirical work post-Barro has failed to find a positive causal relationship between democracy and growth. And this, coupled with the recent spectacular economic performance of China, has been enough to suggest to many observers that, however nice it may be, democracy is no better, and maybe even worse, than autocracy in generating growth. Show more